"The GDP is forecast to grow at 5.8 per cent in 1999/2000 which is marginally lower than the earlier forecast of 5.9 per cent," NCAER said in its quarterly review of the Indian economy. The government has targeted a GDP growth of 6.5 to 7.0 per cent in the current fiscal.

Earlier on Monday, Indian President K R Narayanan told Parliament that the economy was expected to grow over six per cent in the current fiscal year. "The GDP is forecast to grow at 5.8 per cent in 1999/2000which is marginally lower than the earlier forecast of 5.9 per cent," NCAER said in its quarterly review of the Indian economy.

The government has targeted a GDP growth of 6.5 to 7.0 per cent in the current fiscal. The NCAER report said average wholesale price inflation in1999/2000 will rise to 7.0 per cent from 2.51 per cent in the week ended October 9, which is the latest data available. It said a steep rise in diesel prices announced earlier this month would fuel inflation pressures.

The report said: "The diesel price increase would raise inflation by 1.1 per centage points through the remaining five months of the current fiscal." "It is expected that as global prices continue to harden, diesel prices might have to be increased again from the existing levels to maintain parity with global prices."

NCAER said it expected farm sector to grow by 3.0 per cent and the industrial sector by 5.7 per cent in 1999/2000. Higher oil prices will raise the trade deficit and exert pressure on the rupee, the economic think tank said.

"Imports are projected to grow at 27.2 per cent in rupee terms, significantly higher than our last projection due to the higher oil prices. In dollar terms, imports are expected to rise by 9.0 per cent." The report estimated exports to grow at 21 percent in rupee terms or 3.8 per cent in dollar terms.

NCAER said it expected the rupee to depreciate in nominal terms by 16 per cent against the US dollar in the current fiscal year. It expected the government to raise Rs 5000 crore through sale of shares in state-run firms. "The disinvestment target has been assumed at Rs 5000 crore for 1999/2000 against the target of 100 billion set (by the government) in the budget," it said.

The think tank said it expected an expenditure overrun of Rs 2000 crore in the current financial year because of the Kargil conflict. Indian forces repelled Pakistan-backed militants in the Kargil heights in the disputed Kashmir region for about 10 weeks earlier this year.